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Antigua and Barbuda Sales Tax (ABST):. Presentation on draft ABST law. What do all these concepts mean?. A broad-based, multi-stage transaction tax on value added broad-based  charged on a wide range of goods & services multi-stage  charged at every level of the economic chain

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antigua and barbuda sales tax abst

Antigua and Barbuda Sales Tax (ABST):

Presentation on draft ABST law

what do all these concepts mean
What do all these concepts mean?

A broad-based, multi-stage transaction tax on value added

broad-basedcharged on a wide range of goods & services

multi-stagecharged at every level of the economic chain

transaction tax charged on each transaction

value added tax credit for businesses (output tax – input tax) means tax base ≈ salary & wages plus profits

A consumption tax

consumption  passed on to consumers in price of each consumer transaction; consumers cannot claim it back

what is a supply
What is a Supply?

= a transaction involving at least two entities:a supplier who makes a supply to a recipient of the supply

= the supplier does some act that:(a) causes something to pass from supplier to recipient; or(b) causes some benefit to arise for recipient

= the recipient receives something tangible/intangible OR is conferred with a benefite.g. sale, lease, licence, creation of rights or obligations

  • Supplies may involve other entities (to whom the thing supplied is provided) but the tax consequences fall on the supplier and the recipient
two kinds of supplies supplies of goods and services
Two kinds of supplies:supplies of goods and services

Supplies of goods= sales, leases, licences, options to purchase, commodity futures: so long as they are supplies of tangible personal property & real property

Supplies of services = any supply that isn’t of goods is a supply of services; e.g. service industries, IP, restrictive covenants, supplies of rights, lending money, etc.

Q:Does it matter whether a supply is of goods or services?

A:Yes; particularly for place of supply rules & export rules

hotels restaurants
Hotels & restaurants
  • Restaurantssupply & servefood & beverages:this is a supply of goods
  • Hotels supply services (serviced accommodation, internet access, telephone services, tours) and goods (food and beverages, use of yachts/diving equipment etc)
  • Hotels often supply rights to their goods & services in a separate transaction from the supply of the goods or services themselves: the rights are taxed if the goods or services themselves would be taxed
who is required to pay abst
Who is required to pay ABST?

On supplies:

  • RegisteredSuppliers collect it from recipients (customers) by including it in the price of supplies
  • Some registered persons who acquire services offshore (“imported services”) must charge ABST to themselves

On imports:

  • All persons importing goods into Antigua and Barbuda (no registration requirement for importers);
how abst works for businesses
How ABST works for businesses
  • ABST-registered businesses claim back ABST on most of their business inputs (input tax)(input tax includes tax paid on imports and on goods/services acquired from other registered businesses).
  • No input tax credits for private acquisitions, for purchases that relate to making exempt supplies, nor for cars (unless business = supplies of cars)
  • Input tax on capital acquisitions is immediately creditable – c.f. income tax depreciation
abst for registered businesses
ABST for registered businesses
  • ABST charged on supplies = Output Tax

ABST returnsare submitted for each tax period

Net tax payable = OUTPUT tax – INPUT tax

  • Input tax that cannot be claimed back is also passed on to consumers (because it is part of cost of sales)
  • Must have an ABST Invoice to claim input tax credit

If ABST invoice not received until a later period, the input tax is deducted in the later period

global basis for calculations
Global basis for calculations
  • Net ABST payable is calculated for each tax period
  • Input tax on a particular purchase does not have to be credited when the output tax is paid for the supply to which it relates
  • Rather, the input tax incurred in a tax period is credited against the output tax collected in that period.
  • Tracing is only required in a limited sense:for determining whether an acquisition relates to making exempt supplies or private purposes (and therefore is denied an input tax credit)
abst for unregistered businesses
ABST for unregistered businesses
  • Unregisteredbusinesses cannot charge ABST on their supplies of goods and services and cannot claim back the input tax incurred on business inputs
    • No output tax and no input tax credits, therefore they are effectivelyinput taxed
    • Same as suppliers who makeexempt supplies
    • in both cases, the value addedby the unregistered or exempt supplier is not taxed
  • The uncreditable input tax on acquisitions is passed on in the prices charged to consumers
  • Effective rate of tax depends on proportion of price that represents untaxed value added.
how abst works for consumers
How ABST works for consumers

ABST operates like a retail sales tax on consumer purchases of goods and services in Antigua and Barbuda

Consumers:

  • pay ABST on imports
  • are ‘charged’ 15% ABST when they buy goods or services from registered businesses
  • effectively pay partial ABST on purchases from unregistered businesses
  • prices will not go up by 15% because other taxes are being removed – services will go up more than goods; some prices will go down
who will be registered
Who will be registered?
  • To be registered you must:
    • be a taxable person (includespartnerships, trusts, and unincorporated entities)
    • be carrying on a taxable activity (wider than business)
    • have an annual turnover ≥ the registration threshold
  • A person with more than one taxable activity will only need to be registered once: persons are registered, not activities.
  • Some things are not counted in measuring the threshold: exempt supplies, other non-taxable supplies, sales of capital assets, closure of a business… …
documentation requirements
Documentation requirements

A registered person will be required to:

  • issue ABST invoices for taxable supplies to other registered persons
  • issue sales receipts showing ABST paid on taxable supplies to unregistered persons
  • advertise prices ABST-inclusive, stating how much ABST is included
  • display ABST registration certificate at places of business
to reiterate
To reiterate:

TAXABLE supplies:

  • ABST payable; input tax credits allowed

ZERO-RATED taxable supplies:

  • no ABST payable; input tax credits allowed

EXEMPT supplies:

  • no ABST payable; no input tax credits

TRANSACTIONS are exempt; not persons

slide15

To customs

To IRD

$9

$6

$30

$15

+

+

=

$60

$9

$6

+

$30

$15

Paper

Advertising Material

Paper

Goods

ABST Treatment:taxable supplies and imports

$60- 45$15

$15- 9$6

$45- 15$30

Printer

Retailer

Consumer

Importer

Cost: $60

Value added: $40

Sell for:$100

plus ABST: $15

Taxed Price: $115

Cost: $100

Value added: $200

Sell for: $300plus ABST: $45

Taxed Price: $345

Cost: $300

Value added: $100

Sell for: $400plus ABST: $60Taxed Price: $460

Cost: $460(includes $60 tax)

slide16

+

+

=

$0

$9

$6

+

$3

- $18

ABST: Supply to consumer is zero-ratede.g. electricity subject to the basic charge

To customs

To IRD

$9

- $18

$6

$3

$ 0- 18-$18

$15- 9$6

$18- 15$3

Printer

APUA

Consumer

Importer

Printed Invoices

Paper

Paper

Electricity

Cost: $60

Value added: $40

Sell for:$100

plus ABST: $15

Taxed Price: $115

Cost: $100

Value added: $20

Sell for: $120plus ABST: $18

Taxed Price: $138

Cost: $120

Value added: $80

Sell for: $200plus ABST: $0Taxed Price: $200

Cost: $200(no tax)

slide17

=

$30

$30

ABST Treatment:Supplies zero-rated until retailer taxede.g. macaroni sold by a registered restaurant

To IRD

$30

$30- 0$30

300 Consumers

Wholesaler

Retailer

Importer

Macaroni

Cheese

Macaroni

Macaroni

Macaroni

Cost: $60

Value added: $40

Sell for:$100

Cost: $100

Value added: $20

Sell for: $120

Cost: $120

Value added: $80

Sell for: $200plus ABST: $30Taxed Price: $230

Cost: $230(includes $30 tax)

slide18

+

=

$18

$9

$6

+

$3

ABST: Supply to consumer is exempt(e.g. financial services)

To customs

To IRD

$9

$6

$3

$15- 9$6

$18- 15$3

Wholesaler

Bank

Consumer

Importer

Cost: $60

Value added: $40

Sell for:$100

plus ABST: $15

Taxed Price: $115

Cost: $100

Value added: $20

Sell for: $120plus ABST: $18

Taxed Price: $138

Cost: $138

Value added: $80

Sell for: $218plus ABST: $0Taxed Price: $218

Cost: $218(includes $18 tax)

slide19

+

+

=

$32

$9

$4

+

$32

ABST: supply to retailer is exempte.g. financial services

To IRD

To customs

$9

$6

$32

$32- 0$32

$15- 9$6

Bank

Retailer

Consumer

Importer

Cost: $60

Value added: $40

Sell for:$100

plus ABST: $15

Taxed Price: $115

Cost: $115

Value added: $20

Sell for: $135

Cost: $135

Value added: $80

Sell for: $215plus ABST: $32.25Taxed Price: $247.25

Cost: $247.25(includes $32.25 tax)

slide20

=

$9

$9

ABST Treatment:all suppliers are under the threshold

To customs

$9

Wholesaler

Retailer

Consumer

Importer

Cost: $60

Value added: $40

Tax: $9

Sell for:$109

Cost: $109

Value added: $20

Sell for: $129

Cost: $129

Value added: $80

Sell for: $229

Cost: $229(includes $9 tax)

time of supply
Time of supply
  • When do you account for ABST output & input tax?
  • If time of supply is in the current tax period
  • Time of supply is earlier of(a) when invoice issued(b) when all or part of the price is paid
  • Related parties – time of supply is earlier of above or time when goods are delivered or services are provided
  • Supplies that span periods (leases, licenses etc) – each part treated as a separate supply  therefore pay periodically and pay ABST periodically
place of supply
Place of supply
  • Goods: place where goods are when supplied
  • Services: most are where supplier has place of business; some are where supply effectively used or enjoyed
  • Special rules for rights to receive supplies (relevant to hotels)
zero ratings for restaurants
Zero-ratings for restaurants
  • basic foods are zero-rated, but restaurant food is not
  • ABST is more like a retail sales tax for restaurants because many inputs will not be taxed (therefore no input tax to claim back)
  • not entirely because rent of premises will be taxed, power & water will be taxed, equipment, cutlery & crockery etc all taxed therefore input tax credits for these
zero ratings for hotels
Zero-ratings for hotels
  • as for restaurants, basic foods are zero-rated, but restaurant food is not
  • not likely to be any zero-ratings for hotels: the services and goods they provide are consumed here and are therefore taxable
  • this is the case even when they are sold via transactions with related or unrelated non-resident management companies and travel agents/tour operators
exempt c f taxable supplies
Exempt c.f. taxable supplies
  • Sale and rent of residential property are exempt
  • Need for provisions to distinguish hotel or holiday accommodation from rent of private homes as principal residencee.g. need to distinguish condominium hotels from normal residential condominiums
  • Current draft adapted from existing rules – comments on those definitions welcomed
  • Regulations will deal with things like time shares (esp. where rented out by central manager)
sales to non residents
Sales to non-residents
  • Many supplies of goods or services to offshore recipients are zero-rated exports
  • This doesn’t apply to supplies of rights or options (including vouchers) if the goods and services will ultimately be consumed in Antigua and Barbuda
  • Differences between approaches around the world relate only to the VALUE on which VAT/GST/ABST is charged
    • all agree that there should be a local tax burden
    • question is whether value added by non-resident suppliers should be taxed locally
slide27

Foreign Travel Agent

Rights

Rights

Management Company

Tourist (while overseas)

Travels to A & B

Overseas

Antigua & Barbuda

Tourist (in A&B)

Rights

Local Hotel

Services & goods

how are these rights taxed
How are these rights taxed?
  • Not treated as an export even though supplied to a non-resident (because the end consumption is in Antigua and Barbuda)
  • Tax must be applied to the transactions
  • Some countries require the non-resident suppliers to register and pay tax on each transaction (ensures the full consumption price paid by the tourist is taxed)
  • More commonly, the non-residents are left out of the tax regime
  • If the parties are related, market valuation rules apply
how are these rights taxed1
How are these rights taxed?
  • If the non-residents are not included, how much tax is collected?
  • One option is that the local hotel must pay ABST on the sale to the management company based on the value that will be charged to the tourist
  • Alternatively, this may only be required if all the suppliers are related parties: if the non-residents are unrelated entities, the local hotel can be taxed only on what it charges to the first overseas supplier
  • The foreign tour operator’s/travel agent’s margin is taxed where they are located.
abst draft approach
ABST draft approach
  • There is nothing currently specified
  • Current intention is to include provisions dealing with this in the regulations
  • Current leaning towards taxing on outgoing value except where overseas suppliers are related to local hotels
  • Not considered feasible to require non-residents to tax in order to try to capture the full value
structure of the act
Structure of the Act
  • Basic provisions first – definitions then application of the law
  • Administrative provisions
  • Schedules (zero-ratings & exemptions)
  • Regulations – to cover transitional issues
what do you need to do
What do you need to do?
  • identify whether you will exceed the threshold
  • if yes: will your supplies be taxable, exempt, zero-rated, out-of-scope, or a combination
  • implement systems to ensure ABST is charged on the right kinds of supplies
  • work out how your prices should change: subtract taxes saved and then add ABST
  • get ready to print invoices and documents
  • be prepared for submitting ABST returns
what do you need to do1
What do you need to do?
  • ensure there are appropriate links to your accounting systems to separate ABST from your income & costs
  • systems to capture input tax credit entitlements – to ensure you hold ABST invoices and to determine connection between inputs and any exempt or private outputs
  • will your customers be registered?
  • will your suppliers be registered?
  • are you record-keeping systems up to the task?